Well, remember, the core poster of this forum is often interested in one thing: LOW (OR FREE) PRICES. Low prices, no matter how high the cost.
Why have we seen only selective market interventions that are always performed in the interest of those incumbent, well connected major airlines (and how much did this "lobbying" cost them under the table over the years)?
Nobody here gets all angry and asks the government to apply the laws of the land and prosecute, say NW, or DL, when they use unlawful, anti-competitive, temporary predatory pricing tactics to blow a new, low cost, innovative competitor out of the water. No way, because we profit (in the short term) from those insane, impossible prices.
Do we ask the government to refuse to allow solvent but obsolete and clueless airlines to abuse the bankruptcy court? No way, it might hurt "my miles" and my "free upgrades". Goodness gracious.
No, instead there are calls for the government to suspend normal market functioning (yes, normal, when the current structure does not allow market equilibrium, the market is pressured to change its structure) and block the merger (only because DL is on top, otherwise there might have been cheers on this side and no vacuous arguments about competition)
If you read through this thread, those posters who are most against the merger realize that cost reductions aren't enough, yet they are also the ones who most call for airlines to be emasculated in their ability to set sustainable prices and generate required revenue. They call for applying anti-trust legislation to one of the most fragmented, basket-case industries out there.
Of course, prices will have to rise. As it is today, NW can't even put through a measly increase in minimum stay requirements due to the current dysfunctional market structure. Perhaps the entire country can live beyond its means with the head in the sand about gadzillions in growing debt, by just printing more and more steadily worth less and less dollars, but individual companies cannot go on indefinitely charging much less than what it costs them to run the business.
Of course DL & NW are not telling the truth in their merger propaganda to communities, employees and customers (and to the rubber stamp regulators). The whole impossible system is requiring everyone to say one thing and do another. There are certainly high placed role models showing this as the way forward. When the stakes are this high in politics or business in certain countries, no one tells the truth. Especially, as proven here, when people can't handle the truth. What is the surprise here?
I would also guess that those who are posting the most illogical contributions are also not telling what they know deep down inside in their heart to be true, but are just saying what needs to be said in the hope to preserve their own personal benefits.
Yes, higher prices are coming. How we get there could be ordered and civilized or instead messy and raucous with lots of heartbreak, dead companies, unemployed people and vaporized FF programs. It is time to grow up and face the music.
The truth is that prices need to go up because of fuel costs. At $70 per barrel NW and many other airlines can not only survive but throw off a significant profit. If you really believe that oil will and should stay at $117 then I would agree that something drastic needs to happen. But why do you think oil has doubled in the last 1.5 years? Do you honestly believe that we are running out of oil? This is a function of futures traders and speculators and JUST LIKE the .com bubble, it to will burst at some point. Consumers will buy smaller cars, airlines will price themselves out of the leisure market, thus dropping demand, growing inventories lowering oil prices. What you are proposing is that we take competition out of the equation (that is the market force that matters most and ensures the strongest survive) because of a short term issue. When oil drops we will be left with an uncompetitive market where we the consumer are forced to pay obscene prices because there will not be enough competition to keep it in check. It is this mentality that will destroy capitalism.
Why don't we just do what the rest of the transport industries do: add a fuel surcharge that is outside of the ticket price? If NW and Delta would be profitable at $60 oil then lets take the variable out of the equation and let the strongest survive on their own without colluding to take over the world.
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Well, when a boss wants you to work on Saturday he generally asks you at the end of the day, right?
What's wrong with the goal of trying to increase fares to a sustainable by increasing competition within existing antitrust laws? How else are the airlines going to stay in business?
This merger is not about "increasing competition" -- it is about decreasing competition.
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The truth is that prices need to go up because of fuel costs.... What you are proposing is that we take competition out of the equation (that is the market force that matters most and ensures the strongest survive) because of a short term issue. When oil drops we will be left with an uncompetitive market where we the consumer are forced to pay obscene prices because there will not be enough competition to keep it in check. It is this mentality that will destroy capitalism.
Why don't we just do what the rest of the transport industries do: add a fuel surcharge that is outside of the ticket price? If NW and Delta would be profitable at $60 oil then lets take the variable out of the equation and let the strongest survive on their own without colluding to take over the world.
Actually, what I tried to say is that the airline market hasn't ever really been a true capitalistic, free market. And, meaningful, transformative competition has already been taken out of the equation for some time now due to the government support and market intervention and advantages given to the dinosaur US majors, allowing them to stamp out the threat of new, low-cost, efficient, innovative carriers. The best models have not survived, only those established companies with the best lobby teams and deep pockets to "influence".
So, by :
- allowing all kinds of preferential tax and subsidy treatment to the majors (just look at the deals cut in MSP alone to NW etc) but not to the LCCs
- allowing majors to repeatedly screw shareholders, creditors, employees and taxpayers and falsify competition with the LCCs through govt. Ch. 11 courts
- giving billion dollar windfall subsidies to the majors, for the last after 9/11
- not prosecuting the majors for breaking the law when performing predatory pricing to destroy new entrants
- etc. etc.
The market has not benefited from the benefits of free competition where the strongest survive. Companies have also not made rational decisions like investing in efficient planes, or leaving a customer experience in place which is remotely acceptable, or having a business model that can accommodate volatility in key input prices. If the NWDL merger is a merger from hell, it is a hell of our own making.
I have been advocating the temporary use of fuel surcharges (applied now successfully for years by carriers in Europe) but have been all but scalped by other posters here. If there were an energy policy in the States, one could imagine simply requiring surcharges to be collected if the market isn't working.
As it is there are mega-$$$$ being loaned from the Chinese to buy oil on credit from the Saudis to be put into planes that might as well be pissing half the kerosene out of their tail that are flying at prices that don't even cover the cost of doing business of the airline to people who bought tickets they couldn't afford at 18.9% interest on their inflated home-equity-loan based credit cards. That is just not sustainable, whether one thinks that is "eco-babble" or not...
Hey, it could be worse. They could have promised enhancements!
They promised an "improved" frequent flyer program. Until there's demonstration to the contrary, I'm taking that to be akin to "enhancement" in DL-speak.
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This game is not as much fun as it used to be: 2008/2009 Frequent Flyer Program Fleecing Award goes to Delta Airlines
Yeah, ''enhancements'' is corporate babble for hosing the customers while telling them they are getting a better deal. Right!
Now we have a new corporate babble term, borrowed from eco-babble, and that is ''sustainability'', which again means an excuse for hosing customers with higher prices, fewer benefits, or both.
Some of these spin doctors are master Orwellians.
Yes, or so they try.
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This game is not as much fun as it used to be: 2008/2009 Frequent Flyer Program Fleecing Award goes to Delta Airlines
This merger is not about "increasing competition" -- it is about decreasing competition.
Sudden, forced liquidation of critical national airlines without a functioning replacement on the horizon is not about "increasing competition" --- it is about decreasing competition.
They promised an "improved" frequent flyer program. Until there's demonstration to the contrary, I'm taking that to be akin to "enhancement" in DL-speak.
How many airlines which have entered forced liquidation have maintained their frequent flyer programs, miles and benefits? Be careful what you ask for.
I have been advocating the temporary use of fuel surcharges (applied now successfully for years by carriers in Europe) but have been all but scalped by other posters here. If there were an energy policy in the States, one could imagine simply requiring surcharges to be collected if the market isn't working. ...
Fuel surcharges are in place in the US for Trucking, Air freight, and many other transport industries. I agree that would be a better, variable solution to this issue. I think the "scalping" was not based on the idea of a fuel surcharge but the tone of your posts that sound like Europe has all of the answers. This entire topic is Way too huge to address in one string on FT but I do respect every-ones opinion and right to publish it. Being someone who spends a lot of time in Europe and Asia I just do not buy the fact that it is the US who is all wrong. Bankruptcy laws need reform, bail-outs need to be limited (I would argue that 911 was worthy of a bail-out) and we have many things in the US that need a lot of work but I do not believe our business laws are any more destructive than anywhere else in the world and I certainly do not think giving more power to a mega airline is going to benefit anyone in the end. The energy policy in Europe is to force the people who have little to ride bikes and limit what they can do for a living by pricing them out of automobiles through taxing gas. Just filled my tank at $10 USD a gallon, most of which is tax, and while I can do it...fewer and fewer can. If that is energy policy I would say that it will eventually create the classic 2 class society. I don't believe that is the "right" way to manage this.
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ummm yea... right... and where's the info that NW is going into liquidation... this week... this next month, this next year? please stop with the hyperbole.
Quote:
Originally Posted by Klm is Dead - Long Live KLM
How many airlines which have entered forced liquidation have maintained their frequent flyer programs, miles and benefits? Be careful what you ask for.
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Sudden, forced liquidation of critical national airlines without a functioning replacement on the horizon is not about "increasing competition" --- it is about decreasing competition.
The above derivative arguments to justify this merger as "increasing competition" are best classified as malarkey.
"Sudden, forced liquidation" is not a "sudden, forced" result of this merger going ahead or not going ahead -- rather you are coming up with hypothetical scnearios that have so many "if" and "but" conditionalities that to say that this merger's collapse will lead to sudden, forced liquidation of DL and/or NW requires buying into Orwellian-type spin about the meaning of "sudden" and "forced".
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This game is not as much fun as it used to be: 2008/2009 Frequent Flyer Program Fleecing Award goes to Delta Airlines
How many airlines which have entered forced liquidation have maintained their frequent flyer programs, miles and benefits? Be careful what you ask for.
DL and/or NW are not going to face "sudden, forced liquidation" whether this merger collapses before it closes or whether it closes. Scare tactics are no reason to believe this merger will do much to improve the outcomes for current frequent flyer programs' account holders.
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This game is not as much fun as it used to be: 2008/2009 Frequent Flyer Program Fleecing Award goes to Delta Airlines
Fuel surcharges are in place in the US for Trucking, Air freight, and many other transport industries. I agree that would be a better, variable solution to this issue. ...
The energy policy in Europe is to force the people who have little to ride bikes and limit what they can do for a living by pricing them out of automobiles through taxing gas. Just filled my tank at $10 USD a gallon, most of which is tax, and while I can do it...fewer and fewer can. If that is energy policy I would say that it will eventually create the classic 2 class society. I don't believe that is the "right" way to manage this.
I too appreciate when we have healthy debates here and can share different points of view. I am used to paying fuel surcharges today in the States -- most FBOs publish prices for renting a Cessna or a Cirrus -- even wet prices -- excluding fuel surcharges.
Sorry about my tone being sometimes off-putting. I don't think that Europe has all the answers. Given that Europe has been copying the States in about 80% of everything it is doing in forming the European Community, apparently Europe doesn't either. On the other hand, I do believe that we can all learn from each other and that dumb things are done on both sides of the pond.
In critical matters, such as energy and education and national transportation, I believe having a strategy and a policy is often better than having none. The energy policy in Europe is to try to influence behavior consistent with use of a critically important, finite, non-renewable energy source and to stimulate the right kind of future, long-term public infrastructure investments that need to be in place today and tomorrow. These range from maintaining the highways and bridges, to demanding the required, achievable higher efficiency standards on automobiles (if gas is $10 but cars are 2-3 times more efficient, everyone can still drive and for the most part do!), to the investment in real-world, ubiquitous public transportation available to all, to funding alternative energy programs. Another huge advantage of having $10 gas is that people are more careful with it and trade balances don't suffer since a large percentage of the money paid stays to be invested in the country instead of being given wholesale to foreign interests.
As to the creation of a super-rich elite class and poverty level underclasses, I think you will find with a small amount of research that there is much less poverty and better income equality where $10 is being paid for the gas than where $3 is paid...So, something else must be going on here.
At the same time, there are many, many more European families of four being able to take both 5-week-long summer vacations to exotic locations and ski vacations every winter while flying airlines which are charging them taxes, fuel surcharges, and higher fares than those that can do so in the country of the $99 transcon flights. So, something else must be going on here.
I believe that the US could also adjust very well to higher prices to both gasoline and airfares. If the higher prices don't come, there are unfortunately going to be other kinds of very high price to be paid by everyone...IMHO
If the merger can help the market find the needed equilibrium and associated, required higher prices it will be a good thing. Too bad NW is not doing the buying...
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Quote:
Originally Posted by sxf24
Frankly, I'm not sure what your statement contributes to this discussion, other than an inherent and illogical dislike for DL. Perhaps you can tell us why NW's earnings will be so great.
My point is is tha IMO Delta management does not get it and franky Delta management is making illogical moves to try to "merge" themselves out of difficulties.
If the numbers are bad as CEO Anderson has hinted, what is the plan? More voluntary furloughs, involuntary furloughs, park some aircraft, schedule cutbacks - WHAT IS THE PLAN? Whining about fuel prices is not a plan.
How can Delta CEO Anderson promise the Delta pilots a 30% increase in the current loss environment? While well-deserved, is there any logical way this could/can be sustained? It is illogical and ludicrous - "we are losing a lot of money, but here's a raise to support a merger". This is a plan? It makes no business sense - and in all your threads sxf24 you never really have provided any business specifics.
Personally, I think Delta needs to shrink - that's what the market is saying. Delta needs to concentrate on its core business and profitable routes, and reduce or eliminate the non-performing and the marginal aircraft. They should concentrate on raising fares 15%20 - in those profitable environments.
Good idea. Start with Comair. Get rid of that first! Then, park those old 767's.
When I read the email about the merger my first thought was that DL found a more efficient (and possibly cheaper) way to renew their fleet. Instead of shelling out large amounts of cash and waiting years for new planes toa arrive, why not merge with an airline that has new planes (and access to Asia markets).
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